Third Avenue Management recently released its Q1 2020 Investor Letter, a copy of which you can download here. The Third Avenue Small-Cap Value Fund posted a return of -29.59% for the quarter, outperforming its benchmark, the Russell 2000 Value Index which returned -35.66% in the same quarter. You should check out Third Avenue Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.
In the said letter, Third Avenue Management highlighted a few stocks and Cal-Maine Foods Inc (NASDAQ:CALM) is one of them. Cal-Maine Foods is a fresh egg producer. Year-to-date, Cal-Maine Foods Inc (NASDAQ:CALM) stock gained 0.3% and on June 15th it had a closing price of $42.58. Here is what Third Avenue Management said:
“Cal-Maine is the world’s largest producer of shell eggs, selling its products under well-known brands such as Eggland’s Best. Long-term shareholders of the Fund may also recognize the company as a prior Fund holding from years ago, during which time it generated strong returns for the Fund. During the first quarter, volatility in the company’s shares presented another compelling opportunity to invest at a discount to the value of its high-quality asset base and normalized earnings power.
There are a number of things that Fund Management finds particularly attractive about Cal-Maine. First, the company’s fully-integrated asset base would be very hard to replicate. Its scale and state-of-the-art operations enable it to be the lowest-cost producer and a critical part of America’s food system. Second, Cal-Maine is led by an owner-operator management team with a track record that has been superb—as operators, investors, and financiers. Importantly, management has consistently maintained a pristine balance sheet, with effectively no debt and sizeable cash balances currently. Similar to the Fund’s long-term holding Seaboard, Cal-Maine’s strong financial position has afforded management the ability to make large reinvestments of cash flows back into the business and to consolidate the industry through acquisitions. As we mentioned in the agriculture commentary in our last shareholder letter, growth in consumer demand for specialty products, such as cage-free eggs in the case of Cal-Maine, require capital investments that many smaller and less well-capitalized peers are ill-equipped to fund, particularly as the current credit environment becomes less accommodating. Lastly, Cal-Maine’s business has been very resilient over the long term and through economic cycles, with demand for its products structurally growing with the population, and per-capita egg consumption taking share from other animal proteins such as beef. During periods of economic uncertainty such as the current COVID-19 crisis, demand for Cal-Maine’s products also benefit from eggs being a convenient and low-cost food staple. All of these attributes have resulted in Cal-Maine compounding value at extraordinary rates over the long term—around 20% on a per share basis—and we are confident that the company’s strong track record will continue going forward.”
In Q1 2020, the number of bullish hedge fund positions on Cal-Maine Foods Inc (NASDAQ:CALM) stock increased by about 73% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with CALM’s growth potential. Our calculations showed that Cal-Maine Foods Inc (NASDAQ:CALM) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.
